Reverse charge mechanism is a provision under GST where the liability to pay tax is on the recipient of the goods or services instead of the supplier. Normally the supplier pays the tax but under reverse charge the recipient pays the tax directly to the government. The document lists certain categories of goods and services where reverse charge applies such as import of services, services by advocate to business, services by director to company etc. It provides details on when reverse charge is applicable, what taxes to pay (CGST+SGST or IGST), time of supply and few points to note regarding reverse charge such as not using ITC and requirement of self-invoicing.

1. REVERSE CHARGE
MECHANISM
SUBMITTED BY-: KAJAL KHANDELWAL (31622490)
NABENDU MONDAL

2. WHAT IS REVERSE CHARGE ?
As per Section 2(98) of Central Goods & Services Tax Act, 2017(hereinafter
referred as CGST Act, 2017), “Reverse charge” means the liability to pay tax by the
recipient of supply of goods or services or both instead of the supplier of such goods
or services or both under sub-section (3) or sub-section (4) of section 9.

3. Normally under Goods & Services Tax commonly known as GST, supplier of goods or services will collect
the taxes from recipient of such goods or services and pay those taxes to the Government. This is called
Forward Charge. But under Reverse Charge Mechanism commonly known as RCM, Recipient himself liable
to pay taxes to the government.
• Supplier of Goods/Services liable to collect taxes from recipient
and pay to govt.FORWARD CHARGE
• Liability to pay tax falls on recipient i.e. he himself is liable to pay
tax to govt. directly.REVERSE CHARGE

4. I. Notified Categories of supply of goods or services under section 9(3) of CGST Act,
2017
S.No Description Of Services
1 Import of Service.
2 Goods transport agency services, who has not paid GST rate of 12%
3 Services by Advocate (legal services) to any business entity.
4 Services supplied by an arbitral tribunal to a business entity.
5 Services provided by way of sponsorship to any body corporate or partnership.
6 Services provided by Government (Other than renting, speed post, express parcel post, life
insurance, and agency services) to any business entity.
7 Services provided by Government by way of Renting of Immovable property to any person
registered under GST.
8 Services supplied by a director of a company or a body corporate to the said company or
body corporate.
9 Services supplied by an insurance agent to any person carrying on insurance business.
10 Services supplied by a recovery agent to a banking company or a financial institution or a
non-banking financial company

5. When Reverse Charge Is Applicable On Supply under
Section 9(4)
 Section 9(4) provides that GST in respect of supply of taxable goods / services
by a supplier, who is not registered person shall be paid by the recipient under
reverse charge mechanism and all GST provisions shall apply to such recipient as
if he is the person liable for paying GST in relation to the supply of such goods/
services .
 Accordingly , whenever a registered person procures supply from an
unregistered suppliers , he needs to pay the tax on Reverse Charge Basis.
 Exemption (upto Rs. 5000 per day) :
The above provision is not available where the aggregate values of supplies of goods/
services received by a person from any ( Or All) unregistered suppliers is less than Rs. 5000 in
a day.

6. Time Of Supply
Time Of Supply Of
Goods
Date of Receipt Of
Goods
Recording the payment
in the books of
Or the date on which
payment is debited in
his bank account
31st day from the
supplier’s invoice
Whichever is
ealier
Whichever is earlier

7. In Case Of Services
Criteria 2
The date immediately following 60 days from the date of issue of invoice by the
supplier.
Criteria 1
The date of payment as entered in the books of accounts of recipient ( or
payment debited whicher is earlier)Whichever is earlier

8. What taxes should be paid? IGST or
CGST & SGST?
CGST+SGST IGST
Intra State Supply Inter State Supply
When Location of supplier and place of supply?
In Same State In different State

9. Services through an E-commerce operator
 If an e-commerce operator supplies services then reverse
charge will be applicable to the e-commerce operator. He
will be liable to pay GST.
 For example, UrbanClap provides services of plumbers,
electricians, teachers, beauticians etc. UrbanClap is liable to
pay GST and collect it from the customers instead of the
registered service providers.
 If the e-commerce operator does not have a physical
presence in the taxable territory, then a person representing
such electronic commerce operator for any purpose will be
liable to pay tax. If there is no representative, the operator
will appoint a representative who will be held liable to pay
GST.

10. i) For all procurement of goods or services or both from unregistered dealers (a person who is
not registered under GST Act), there is a levy of GST on Reverse Charge Basis.
ii) Point to be noted for paying tax under RCM u/s 9(4):
* Transaction should be supply o Such supply should be taxable Supplier is
un-registered .
* Tax to be paid on the transaction value.
* Rate of tax depends on supply of goods or services.
However an exemption has been given for paying taxes by registered person for procurements
from an unregistered person from 13th October 2017 to 30th June 2018.
Few Points to be Noted

11. GST under reverse charge cannot be paid by utilizing ITC :
This is because for payment of GST on outward supply, input tax credit on inward supply can
be utilized . GST under reverse charge mechanism is not on outward supply ( it is tax on
inward supply ) . After payment of tax under RCM, it can be utilized for the payment of GST on
outward supply .
Self Invoicing :
Self-invoicing is to be done when you have purchased from an unregistered supplier AND
such purchase of goods or services falls under reverse charge.
This is due to the fact that your supplier cannot issue a GST-compliant invoice to you, and
thus you become liable to pay taxes on their behalf. Hence, self-invoicing, in this case,
becomes necessary.